Konfio has become the latest Latin American fintech Goldman Sachs has bet on, reports Bloomberg. The credit line will help the startup, which provides small-and medium-sized businesses (SMBs) with unsecured working capital, to lend around $250 million in the next year, founder and CEO David Arana told Bloomberg.Currently, Konfio’s average loan size is about $20,000, and it plans to expand this by using guarantees or collateral. Beyond loans, the company also provides SMBs with technology aimed at helping them better understand their businesses, according to Arana.
Mexican SMB have long struggled to access capital — giving Konfio a long runway for growth in the country. Just around one-third of SMBs in Mexico have access to banking loans, according to a central bank report cited by euromoney, despite SMBs accounting for close to 9 out of 10 businesses in the region.
Moreover, despite the credit market to these businesses equating around $100 billion, incumbents have been pulling away from the segment in recent years, Arana says. The substantial market size coupled with the fact that SMBs continue to be poorly served in Mexico by traditional lenders is a boon for Konfio: The five-year-old company has already served 1 million clients, a figure that it’s poised to accelerate considerably with its new credit facility.
Konfio is able to address Mexico’s lending problem in a variety of ways, all by leveraging technology. For instance, by using technology to analyze credit behavior and other types of data, Konfio can make loans available in as little as 24 hours.
That’s compared with traditional loans to SMBs in Mexico, for which approval can take months and require collateral or guarantees, per Bloomberg. Konfio can also undercut incumbents: Its interest rates are half those charged by traditional banks, according to Arana. And, crucially, Konfio’s tech-driven approach to assessing creditworthiness has helped the company to keep delinquency rates down: The fintech’s default rates were 4.8% in 2018, compared with 5.4% for the banking industry.
The Konfio transaction marks the latest bet Goldman is making on Latin American fintechs — and the region seems set to be a hotbed of activity.

Across its various units, Goldman has already backed a number of Latin American fintechs. Its most notable investment so far was in Nubank, the Brazilian neobank founded in 2013, which has since become the country’s fifth-biggest credit card issuer. Goldman loaned Nubank 200 million reais ($52 million) in 2016, which it extended to 455 million reais ($121 million) in 2017, per Bloomberg. The bank has also invested in Mexico-based SMB lender Creditjusto twice; it agreed to provide the startup a credit facility of up to $100 million in March this year, and then contributed to a $42 million funding round in August.

The bank’s bullish outlook on Latin American fintechs is likely driven by the fact that the region’s financial services infrastructure remains poor. It’s not only SMBs that struggle to access financial services in the region: Almost half of Latin America’s population is unbanked— meaning they lack access to basic banking services. The low penetration offers a vast opportunity for the region’s fintechs: They can leverage technology to serve previously out-of-reach consumers, at lower costs than incumbents, which have long relied on their extensive brick-and-mortar networks. And as fintech segments in developed economies become increasingly saturated, the promising size of Latin America’s market will make it a growing area for fintech funding.